US equity futures and European equities stocks wavered Monday as crude oil extended a climb and investors monitored diplomatic efforts to bring an end to Russia’s almost month-old war in Ukraine.

The S&P 500 and Nasdaq 100 contracts retreated, pointing to a pause after the underlying indexes posted their best weeks since November 2020. The Stoxx Europe 600 Index opened little changed, as gains in energy firms were offset by losses in travel and leisure companies.

West Texas Intermediate oil rose to almost $ 110 a barrel as investors assessed the war as well as Middle East tension. Australia’s ban on exports of aluminum to Russia sparked an advance in aluminum. A gauge of the dollar pared earlier gains to trade flat.

A key question is whether last week’s stock rebound and drop in volatility are durable. European equities have recouped all of their losses triggered by the invasion of Ukraine nearly a month ago as optimism around peace negotiations and the lure of cheapened valuations draw investors back.

But a historic spike in commodity prices on supply concerns shows little sign of easing, keeping traders on high alert over inflation and shaking their faith in the Federal Reserve to douse price pressures while keeping the economic recovery on track.

“Our concern is that the Fed is tightening into an economic slowdown as it prioritises high inflation,” Sue Trinh, head of Asia macro strategy at Manulife Investment Management, said on Bloomberg Television. “It will balance that trade-off of slower growth, higher inflation by lagging the market pricing in terms of the pace, magnitude and duration of this tightening cycle.”

The war in Ukraine and the resulting sanctions over invader Russia have sent the raw-materials markets into a tailspin, with the potential for shortages in key commodities like oil and wheat as exports are disrupted. Turkey said Moscow and Kyiv are moving closer in talks towards a cease-fire.

The bond market continues to flash caution about the economy. The Treasury yield curve is flattening, and portions are inverted, which for some is an indicator of a looming economic slowdown. The 10-year US yield climbed to about 2.18%.

Traders will monitor a speech later Monday by Federal Reserve Chair Jerome Powell, less than a week after he and his colleagues kicked off a rate-hiking cycle. Markets expect the Fed to lift its target rate to around 2% by the end of this year.

In China, embattled real-estate developer China Evergrande Group suspended trading in Hong Kong. Meanwhile, reopening stocks in the city climbed as Hong Kong moved to ease Covid-related restrictions.

Here are some key events this week:

  • Federal Reserve Chair Jerome Powell and Atlanta Fed President Raphael Bostic to speak, Monday
  • European Central Bank President Christine Lagarde among central bank speakers at the BIS innovation summit, Tuesday to March 23
  • EIA crude oil inventory report, Wednesday
  • Bank of England Governor Andrew Bailey, Fed Chair Powell speak at BIS panel, Wednesday
  • UK Chancellor Rishi Sunak’s “Spring Statement” on the budget, Wednesday
  • US President Joe Biden attends NATO emergency summit in Brussels, Thursday
  • Eurozone Markit PMIs, Thursday
  • US initial jobless claims, US durable goods, Thursday

Some of the main moves in markets:

Stocks

  • Futures on the S&P 500 fell 0.2% as of 5:10 am New York time
  • Futures on the Nasdaq 100 fell 0.4%
  • Futures on the Dow Jones Industrial Average fell 0.3%
  • The Stoxx Europe 600 fell 0.1%
  • The MSCI World index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.2% to $ 1.1070
  • The British pound fell 0.2% to $ 1.3153
  • The Japanese yen was slightly changed at 119.22 per dollar

Bonds

  • The yield on 10-year Treasuries advanced four basis points to 2.19%
  • Germany’s 10-year yield advanced three basis points to 0.40%
  • Britain’s 10-year yield advanced four basis points to 1.54%

Commodities

  • West Texas Intermediate crude rose 4.5% to $ 109.37 a barrel
  • Gold futures fell 0.1% to $ 1 931.10 an ounce

© 2022 Bloomberg



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